INCOME TAX OFFICER Vs. G N RAMACHANDRAN
INCOME TAX APPELLATE TRIBUNAL
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T. Venkatappa, Judicial Member -
(1.) THE assessee went to USA. He received stipend of $ 10,833.33 and $ 24,111.08 in the calendar years 1977 and 1978, relevant to the assessment years 1978-79 and 1979-80, respectively, from the National Institute of Health (NIH), Bethesda, Maryland, USA. He also received $ 1,025 and $ 600 in the said two years, respectively, for giving lectures and also received royalty of $ 505 in the calendar year 1978. THE foreign income was shown in the returns for these two years. No claim for exemption under Section 10(16) was made before the ITO. In appeals, it was held that the amount received by the assessee was not in the nature of salary but in the nature of scholarship. THE decision of the Karnataka High Court in A. Ratnakar v. Addl. CIT  128 ITR 527 squarely applies. Following the above decision, the appellate authority in these two years held that the entire income received by the assessee from the USA is exempt under Section 10(16). Against the said orders, the revenue has come up in appeals.
(2.) The learned departmental representative submitted that the assessee should prove that the amount of scholarship is utilised for the purpose for which it was given. In fact, the assessee had not spent the entire amount of scholarship given. Thus, the assessee was not entitled to the exemption under Section 10(16). The ratio laid down in the decision of the Karnataka High Court reported in A. Ratnakar Rao v. Addl. CIT (supra) does not apply. Alternatively, he submitted that at least the remuneration received for giving lectures and the royalty amount are taxable and they are not exempt under Section 10(16). The learned counsel for the assessee supported the orders of the appellate authority. He urged that the assessee received the scholarship and that is evident from the certificates of NIH. Section 10(16) states "scholarships granted to meet the cost of education". It does not speak of spending unlike Section 10(74). He urged that the decision of the Karnataka High Court in A. Ratnakar Rao v. Addl. CIT (supra) squarely applies. With regard to the remuneration received for lectures and the amount of royalty, he urged that it is not taxable. At any rate, on the above amounts relief under Section 80RR should be allowed.
We have considered the rival submissions. From a reading of the certificates dated 13-6-1978 and 2-3-1978 of National Institute of Health (NIH), Bethesda, Maryland, USA, it is very clear that the sum of $10,833.33 and $24,111.08 paid in these years to the assessee was by way of stipend and the primary purpose of that was to further the education and training of the fellow rather than to benefit the grantor. It further states that the stipend payments do not represent compensation for past, present or future employment services nor do they represent remuneration for services subject to the direction or supervision of the grantor. Thus, the amount received by the assessee is not in the nature of salary but in the nature of scholarship. It clearly falls under Section 10(16) and is exempt. The ratio laid down by the Karnataka High Court in A. Ratnakar Rao v. Addl. CIT (supra) squarely applies to the instant case. Thus, the above amount received is exempt under Section 10(16).
(3.) THE sum of $ 1,025 arid $ 600 received in the calendar years 1977 and 1978, respectively, and $ 505, being royalty, received in the calendar year 1978, are not exempt under Section 10(16) as they are not scholarship granted. Hence, they are taxable. THE question as to the relief under Section 80RR claimed by the assessee requires examination. For this purpose, we restore the matter to the file of the ITO to examine the claim under Section 80RR.;
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